Where is the risk? Price, yield and cost risk in Swiss crop production

Risk management strategies are of increasing importance in agriculture. An important question is what type of risk management strategies are required to reduce farmers’ income risks? Applying a variance decomposition approach using data from more than 3,000 Swiss farms over a five-year period, this paper quantifies the direct and indirect effects of yields, prices and costs on net revenue variability at the farm level. We find that costs play only a minor role in determining income variability, but price and yield risks are of outmost importance and very crop-specific. For instance, price risks dominate for conventional wheat and sugar beet producers; while corn and barley producers tend to suffer more from production risks. Group comparisons and logistic regressions results show that more intensively producing farms tend to suffer more from price risk, while yield risks are dominant for less intensive producers.